Euro leaders, Greece strike a deal

Greece struck a deal Monday morning for a third bailout from its European creditors, averting for now the collapse of its banking system and possible expulsion from the single-currency eurozone.

After almost 17 hours of heated negotiations that ended just before 9 a.m. in Brussels, the 19 eurozone leaders agreed on a series of measures that would provide Greece with up to €86 billion over three years.

“There will be no Grexit so, in form and substance, we are satisfied with the solution we have found,” said European Commission President Jean-Claude Juncker.

But first, the Greek Parliament will have to adopt the kinds of reforms that Greek voters rejected in a referendum a week ago, and which many in Prime Minister Alexis Tsipras’ party have already denounced as a humiliating capitulation forced mainly by Germany.

The bitter end

“We succeeded in getting the restructuring of the debt and certain refinancing in the future,” Tspiras said after the summit. “We succeeded in setting the base for change in Europe and we are going to continue fighting and we will keep fighting to regain our lost sovereignty.”

“I think the vast majority of the Greek people will support this…because they understand that we have given our best to the bitter end,” he said, hinting at how hard the political fight in Athens will be.

Tsipras bowed to the tough demands of the eurozone leaders after Berlin proposed its temporary suspension from the currency union. He must now get much of the necessary legislation through Parliament by Wednesday to start talks on a bailout.

Finance ministers for the eurozone are scheduled to meet at 3 p.m. on Monday in Brussels to hammer out short-term, emergency financing.

The release of the funds would relieve the financial squeeze that has gripped Greece for the past two weeks, forcing the country to close it banks and limit cash withdrawals to €60 a day.

Greece must convince its creditors that it will abide by its agreements, something successive governments over the years have failed to do.

The document that framed eurozone leaders’ discussion — full of brackets denoting controversy — tasked Tsipras with about half a dozen points that have to be legislated “without delay” by July 15. They were:

In addition, Greece must agree to the following within a “satisfactory clear” period of time:

Privatize the electricity transmission grid.

Take decisive action on non-performing loans.

Ensure independence of the privatization body.

De-politicize Greek administration.

Deregulate service sector.

Review labor market regulation such as collective bargaining.

Strengthen independence of Greek privatization agency or place €50 billon in Greek assets into an escrow account abroad.

Reverse laws adopted by Syriza since coming to power in February that the Eurogroup considers in breach of prior agreements with creditors.

Athens would also have to allow the return of inspectors from the European Commission, European Central Bank and the IMF, whose participation in the latest rescue attempt is unpopular among Tsipras’ leftist supporters.

Europe breaks ranks

For months, eurozone leaders presented a united front on Greece, insisting that it stick to its previous commitments and endure deep spending cuts and sweeping reforms in exchange for aid.

But the events of the past few weeks, a series of crisis meetings and the No vote in Greece’s July 5 referendum shifted the landscape.

The Greeks’ resounding repudiation of Europe’s reform agenda sent shock waves across southern Europe, where many countries face similar, if less severe, pressures.

France was the first to break ranks with Germany, followed by Italy, reopening the continent’s north-south divide.

French President François Hollande said it was “a new time for the European construction,” insisting the monetary union needed to “better protect itself and experience more growth.”

However, in the end, it was Germany’s insistence that Athens prove its commitment as a pre-condition for more aid that forged consensus.

“The responsibility of [Greece] itself must be pushed to the front…confidence in the currency union that we can all depend on has been seriously shaken,” said German Chancellor Angela Merkel.

#ThisIsACoup

Greece’s track record of living up to its promises over the years has been poor. But some worry that the eurozone’s treatment of Athens in recent days bordered on punitive and violated core European ideals of sovereignty and solidarity. In Germany, there was concern that Berlin’s harsh stance could trigger a backlash against Germans.

Initial reactions to the German-sponsored plan for Greece were marked by disbelief and anger. On Twitter, #ThisIsACoup quickly became the most-used hashtag in Europe, as users vented their frustration and blamed Germany.

Leaders got bogged down in discussions of whether a new rescue deal should involve relief of its public debt — which all sides agree is unsustainable at about 180 percent of economic output — and on whether Greece could privatize €50 billion worth of its industries and services, or should deposit that amount of assets in an account abroad to be privatized on its behalf.

“There’s no such thing as €50 billion in Greek property,” said one Greek official, citing a study by the International Monetary Fund that put the annual potential proceeds from privatization at €500 million per year. “The figure is on another planet,”said the official, who requested anonymity.

However, with trust destroyed between Athens and its eurozone partners after five years of false starts and two failed bailouts worth about €240 billion, the eurozone leaders wanted to ensure Greece will act on its promises.

Leaders will hold Greece to commitments to reform its tax and pension system, overhaul its judicial system and ensure the independence of its statistics office — to ensure accurate reporting of economic performance — and of the agency in charge of privatizations.

Greece also agreed to the establishment of an independent fund that will set aside assets for privatization and manage their sale.

Contributing: Craig Winneker, Quentin Ariès and Zeke Turner.

This story was updated to add breaking-news developments, quotes and context.

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Michel

Hands up who really believes Greece will honor it’s commitments this time?

A Grexit would be better, now the hope lies with the greek parliament…

Posted on 7/13/15 | 10:45 AM CEST

fairleft

German purist wailing is pushed aside and the Wall Street and Western aristocracy plan, ‘austerity for everyone except us’, marches on. A horrific deal, much worse than the Greek people rejected by a 61% vote, gets done. And now Syriza and Tsipras are Greece’s new symbols of austerity. Deeper poverty, shortened lifespans, more hunger, more young people escaping in droves, more old folks working hard, physical working-class jobs till they’re 67 unless they die early within a bare bones and privatized healthcare system.

Posted on 7/13/15 | 10:57 AM CEST

Ivan

I was hopping for Grexit this time. EU parliament starts to resemble the US senate too much for my liking. I think EU should face the facts of the Greek culture and mentality and the reality that Germany is pulling the strings.
In this way they are just prolonging the agony.

Posted on 7/13/15 | 11:17 AM CEST

Zafar

Subject: The Greek Saga

MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.

She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).

Soon she has the largest sales volume for any bar in Dublin — all is starting to look rosy.

By providing her customers freedom from immediate payment demands Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Mary’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognises that these customer debts constitute valuable future assets and increases Mary’s borrowing limit.

He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into Drinkbonds and Alkibonds. These securities are then bundled and traded on international security markets.

The new investors don’t really understand that the securities being sold to them as ‘AAA’ secured bonds are really the debts of unemployed alcoholics. They have had a ‘rating house’ certify they are of good quality.

Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary’s bar. He so informs Mary.

Mary then demands payment from her alcoholic patrons, but, being unemployed alcoholics, they cannot pay back their drinking debts.

Since Mary cannot fulfil her loan obligations she is forced into bankruptcy. So she now is broke.

The bar closes and the 11 employees lose their jobs.

Overnight, Drinkbonds and Alkibonds drop in price by 90%.

The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Mary’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various Bond securities. They find they are now faced with having to write-off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.

Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro, no-stringsattached cash infusion from their cronies in government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary’s bar.

nmb

Robert

Tsipras should resign. Putin offered a bailout. It was turned down.Golden Dawn is going to get their chance.

Posted on 7/13/15 | 4:35 PM CEST

Jodocus

@Michel, Iwan, ExLiberal

If you read the news about the agreement, you’ll see there is practically no “wiggle room” left for Greece.

It must reflect the creditors’ demands in legislation by wednesday. If it does that, the agreement comes into effect.
In addition, It must also rescind legislation (eneacted under Syriza) that contravenes earlier agreements. Apart from that, Greece is effectively placed under curatorship as regarts reforming its civil service.

So as far as reforms are concerned, it probably won’t be for lack of trying.

@fairleft

Rather than spouting undirected moans about “Wall Street” and “Western Aristocracy”, perhaps you should remember that Greece still has the option of leaving the Eurozone, and always had. If Greece *really* believes that this is a bad deal, it is (more than) welcome to leave the Eurozone.

All I know is, that as a Dutch taxpayer, I’m on het hook again for 5.7% of about 82 billion Euros for Greece’s debt rollover and I know for damned sure I didn’t ask for that.

You do realise that Greece’s creditors *already* received a “haircut” four years ago, don’t you? And that useless and unproductive “make-work” government jobs are a total waste of money and constitute a structural drag on the economy? And that adjusting government spending to government earnings (the ill-famed “austerity”) has more or less succeeded to help countries like Ireland, Spain, Portugal, Estonia and Lithiania etc. to regain stability? And that Keynesian spending (like what France has been practising for several years now) doesn’t seem to work this time round?

Of course you are right (as the IMF admits) that restructuring Greece’s debts is necessary. However I am fairly confident that such restructuring will be negotiable *after* Greece has shown progress with its reforms.

The issue with Greece isn’t just spending. It’s conspicuously (and for no good reason) failing to put reforms in place like for example the case of installing a functioning land-ownership registery for at least 4 years (and probably since 1998). And setting divorcing the statistics office from political oversight. And the fact that Greece cheerfully offered to implement the *very same reforms it failed to deliver last time*! That was generally seen as farcial (and not merely incompetent). This (among other things) is what the EU leaders politely phrased as “the need for Greece to earn trust”.

Posted on 7/13/15 | 4:39 PM CEST

rham

The problem with socialism is that it runs out of other peoples’ money. M. Thatcher

Posted on 7/13/15 | 4:57 PM CEST

Michael Iger

What Greece has done is show the shortcomings of European union. Greece really was in a no win situation and the EU faced not only settling Greece, but where with it end for their other troubled nations. What came down was for Greece to get its house in order and then the bailout will follow. Not the bailout they demanded, but enough to keep them alive in the EU. As I said no good choices, but the best one for Greece when you realize more aid otherwise was not forthcoming. By pushing out the term of the loan the EU is in the end forgiving a good portion of it, since inflation and the time value of money will eventually erode it. Greece has to understand in spite of the pain they have been given a second chance.

Posted on 7/13/15 | 5:40 PM CEST

Alfreda Weiss

The real deal is the 55 billion in government-owned properties forced into private sale. It is similar to the millions of foreclosures done by fraud that allowed the same Wall Street criminals to buy them cheap for their personal profit. Greece should take the EU money and not sell the properties. This is economic war and massive loan sharking. No obligation to be honest in this criminal environment. Meanwhile prepare to return to a dual currency of Euro’s for the tourists and Dracmas for the Greeks.